Many Advisers Failing To Take A Shine To Gold

October 26, 1987|By New York Times News Service.

NEW YORK — When investors fear the return of high inflation or believe financial calamity is imminent, gold is the usual haven of choice.

Yet, despite last week`s stock market gyrations, many successful investors do not believe either of those developments is likely. So they recommend that investors stay away from gold. And those who own bullion or gold shares should sell before prices drop further, these advisers say.

``I can`t see owning gold unless you think the whole system is going to unwind,`` said Neil J. Weisman, general partner of Chilmark Capital, who moved his clients` funds into Treasury bills a week before the market fell apart.

Advisers and money managers are avoiding gold because they do not view last Monday`s Wall Street panic as a warning that the financial system is on the brink of collapse.

Beyond that, the pullback of stocks means few are expecting a return of the double-digit inflation. In fact, many financial experts say deflation is more likely.

Gold prices also have poor prospects, according to analysts, because there is a fairly stable balance of supply and demand.

Until last week, the price of gold had been climbing from a recent low set in February, 1985. As the dollar declined in value, the price of the metal surged. This year it was one of the better-performing investments.

The price of bullion was up 17 percent, and gold-oriented mutual funds, which invest in the stocks of gold-mining companies, were up even more.

But gold moves on emotion, and that keeps many professionals from buying it.

``I have a hard time betting on psychology,`` said Jonathan Berg, president of New York`s Berg Capital Corp. Throughout 1987 experts have suggested that the metal`s price advance has been based on fear of tensions in the Persian Gulf and the perception, rather than the reality, of higher inflation.

``Those who are afraid would be better off owning Treasury bills, which at least pay interest,`` Berg said.

Professional investors dislike gold for a variety of reasons. They say the psychology of gold investors is overly bullish.

Market analysts also are warning that stocks of mining companies are extremely vulnerable. At their peak, they were selling at 70 times earnings.

Even with the belief that gold has weak prospects, some financial planners suggest that individuals maintain at least 5 to 10 percent of their savings in gold at all times. That way, they say, investors are protected no matter what happens.